IBM and Advanced Micro Devices have tacked a three-year extension onto their December 2002 collaboration agreement that could see the two companies work on chip-making technologies based on a 32-nanometer process. The agreement was set to expire at the end of 2005, but now extends until December 31, 2008.

Under the revised agreement, dated September 15 and included in documents filed with the U.S. Securities and Exchange Commission, AMD will pay IBM between $250 million and $280 million over the next four years. In exchange, IBM will continue to host the research and development work at its East Fishkill, New York, facility.

"It's a sign that our relationship with IBM is going very well and this has benefitted both companies," said Karen Prairie, an AMD spokeswoman.

Future Chips

The most advanced chip-making processes today can create wires on a microchip that are as small as 90 nanometers, but IBM and AMD were collaborating on techniques to shrink them even further. (A nanometer is one-billionth of a meter.)

"We were already collaborating on 65-nanometer and 45-nanometer technology," said Chris Andrews, an IBM spokesman. "Now we've also added joint development on 32-nanometer technology to the agreement."

Though both IBM and AMD maintain chip-making foundries, the updated agreement gives AMD the right to have a third party manufacture chips based on the jointly developed technology, Andrews said.

AMD has also now licensed IBM's C-4 "flip chip" packaging technology, which is used to connect the microprocessor to the circuit board on Big Blue's server processors, Andrews said.

AMD and IBM have also worked together on the silicon-on-insulator technology that is used in AMD's Opteron processors, he said.

The Team Trend

With the business of manufacturing microprocessors steadily becoming more complex and expensive, many vendors have turned to partnerships to defray costs. Hewlett-Packard, for example, partnered with Intel on the development of the Itanium microprocessor that is at the heart of HP's Integrity systems. And earlier this year, Sun Microsystems announced that it would stop development on its next generation UltraSparc V processors in favor of chips built by Fujitsu.

Last week, industry research firm Gartner issued a report predicting that the number of companies involved in the semiconductor industry will shrink by 40 percent over the next ten years, largely as a result of the increasing cost and complexity of the business.

"Increasingly these more advanced technologies, like the move to 65 nanometer and the move to 45 nanometer are going to be very challenging," said Andrews. "If you have a skilled partner with whom you can share the investment, it helps."

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